Nickel prices are topping out due to weak Chinese demand, Macquarie said in a research report. Nickel was one of the worst performing metal at the London Metal exchange (LME) in 2011.
Nickel is a metallic element, discovered some 250 years ago. It is the fifth most abundant element in the earth, after iron, oxygen, silicon and magnesium. While much of the nickel is in the earth’s core, it is also common in the crust.
Nickel is extracted from deposits of nickel-bearing minerals in the Earth's crust, which, over geological time, have concentrated nickel into relatively small areas of the globe. Some deposits are deep under ground (such as in Canada). Others are near to the surface (New Caledonia).
Nickel ores are found in many countries, but the principal nickel mining areas are Australia, Brazil, Canada, China, Colombia, Cuba, Dominican Republic, Greece, Indonesia, New Caledonia, Philippines, Southern Africa and Russia. Important European nickel refineries also operate in Norway, Finland, France, and the United Kingdom.
Nickel is a highly volatile traded commodity due to its importance as a critical input in stainless steel manufacture. Manufacture of stainless steel accounts for 65 percent of global nickel output while 20 percent goes in other steel and non-ferrous sectors.
Nickel finds its usage in various industries such as engineering, electrical and electronics, infrastructure, automobile and automobile components, packaging, Batteries etc.
Rising demand and limited supply is the major feature of global nickel industry at present. Nickel is silvery white and takes on a high polish. It is hard, malleable, ductile, somewhat ferromagnetic, and a fair conductor of heat and electricity. It belongs to the iron-cobalt group of metals and is chiefly valuable for the alloys it forms.
Nickel is found as a constituent in most meteorites and often serves as one of the criteria for distinguishing a meteorite from other minerals. Iron meteorites, or siderites, may contain iron alloyed with from 5 percent to nearly 20 percent nickel.
Russia tops in global nickel output followed by Australia, Canada and New Zealand. China, US and European Union are the main consumers of nickel. With growth in the stainless steel sector Nickel import demand is expected to increase in the coming years.
According to International Nickel Study Group, the nickel reserves relate to proven reserves in land based deposits. Nickel resources (estimated at twice the amount of nickel reserves) which would encompass sub-economic reserves, i.e. not mineable at a profit are not included in the table. The development of new process technologies will result in the conversion of some resources into the reserve base. Ongoing exploration continues to add to both bases. According to some sources, nickel resources on the sea-bed are many times those located on land. The land resource base is thought to be in excess of 100 years at the present mining rate.
Nickel demand in Europe decreased in the period 2002-2005 before recovering in 2006. In the Americas demand fell between 2002 and 2003 before growth resumed in 2004. Nickel demand increased strongly in Asia throughout the same period and stood 35% higher in 2006 than in 2002 thanks to rapid increase in Chinese nickel usage. Nickel demand is expected to continue to rise by 2-3% per annum.
Stainless steels account for about two-thirds of nickel usage (consumption) up from one-third in the past three decades. The market for stainless steel is growing at the rate of about 5-6% per annum. Little growth is expected in the other sectors of first use.
Strong world economic growth through the last five years has continued to support rising nickel production. In 2006 world primary production stood 14% higher than in 2002. In Europe, expansion in production was registered in Russia and Norway.
In Oceania, Australia and New Caledonia experienced a decline in primary nickel production while Japanese primary nickel production also declined in both 2005 and 2006. Although world nickel production looks likely to recede in 2007 compared with 2006, further expansions by existing producers mainly in China, Canada and Russia indicate that a nickel production increase looks likely for 2008.
The price of nickel has experienced volatility over the last twenty years. In the first half of the 1990s the economic collapse of the former "Eastern Bloc" countries resulted in a surge of nickel exports that drove nickel prices lower than the cash costs of production resulting in reduced nickel production in the "West". Until 2003 the nickel cash price remained below US$10000 per tonne.
The price breached $14000 per tonne in 2005 and then escalated dramatically through 2006 before peaking at an average of $52179 per tonne in May 2007. World nickel usage in 2006 stood 16 per cent above the level recorded during the price trough of 2001 and climbed further in the first half of 2007 thanks to buoyant Chinese demand.
The nickel market registered a deficit of about 44000 tonnes in 2006, but this cannot explain the degree of price escalation experienced through 2007. The collapse of the nickel cash price to an average of $27652 in August 2007 would seem to indicate that speculative investment as well as strong market fundamentals played a part in the price bubble.
